When you’re a KiwiSaver member, your employer has to contribute 3 per cent of your salary to your chosen KiwiSaver fund. But is that enough to set you up with a quality retirement?

Compared with Australia, Kiwi employers are getting off lightly. Across the Ditch, an employer must make mandatory contributions into your super account of at least 11 per cent of your earnings – and that’s rising to 12 per cent by 2025. These employer contributions are called the “superannuation guarantee” and were introduced in 1992 to help support an ageing population.

As an Australian employee, you don’t have to make any personal contributions if you don’t want to. However, if you do make voluntary contributions, the tax rules can make it highly advantageous, which encourages you to put in your own money on top up your employer’s hefty contribution.

Here in Aotearoa, if you’re a KiwiSaver member your employer must contribute 3 per cent of your gross wage, including all your bonuses and overtime. You choose how much to contribute from your salary, in increments between 3 and 10 per cent. You can also make additional contributions above 10 per cent if you like. (Or you can opt out, in which case your employer doesn’t have to make contributions either.) That’s a total of 6 per cent, but should KiwiSaver be tweaked so employers pay more?

Employer contribution

It’s obvious that contributing 11 per cent of your income is going to grow your super balance more than contributing 6 per cent (your contributions plus your employer’s).

It’s hard to compare apples with apples, due to variables like insurance and fees, but as a very rough guide, here’s how the difference could look over the years. In this example, you’re starting out at age 20 earning $50,000 a year, and the numbers have been run on government-sponsored calculators from Australia and New Zealand.

Country of residence	Australia	New Zealand
Age	20	20
Salary	$50,000	$50,000
Your contributions	0	3%
Employer contributions	11%	3%
Annual return	6.5%	Growth fund
Balance at age 65, adjusted for 2% annual inflation*	$500,435	$254,964

The total is adjusted for inflation so you can see what the total sum would be worth in today’s money. The inflation-adjusted number is the default option on KiwiSaver calculators.

What if we tweak rates over time?

It’s hard to imagine employers accepting a sudden jump in KiwiSaver contributions from 3 to 11 per cent, but we could start slowly ratcheting up the minimum rate over the years. Moving up a percentage point or three would have a massive impact:

New Zealand
Age	20	20	20	20
Salary	$50,000	$50,000	$50,000	$50,000
Your contributions	3%	3%	3%	3%
Employer contributions	3%	4%	6%	8%
Annual return	Growth fund	Growth fund	Growth fund	Growth fund
Balance at age 65, adjusted for 2% annual inflation	$254,964	$289,976	$360,000	$430,024

There is a precedent: we moved the compulsory employer contributions from 2 to 3 per cent in 2013. Surely, we could do it again?

We could also boost the minimum employee contribution rate slightly, from 3 to 4 per cent, to match Australia’s total of 12 per cent. With a 12 per cent total contribution, what could retirement savings look like?

New Zealand
Age	20	20	20
Salary	$50,000	$50,000	$50,000
Your contributions	3%	4%	4%
Employer contributions	3%	6%	8%
Annual return	Growth fund	Growth fund	Growth fund
Balance at age 65, adjusted for 2% annual inflation	$254,964	$402,439	$472,463

Review at least once a year

KiwiSaver does get reviewed occasionally, but will the contributions change soon? Unlikely. That means you’ll have to do the work to maximise your KiwiSaver.

Make sure you’re getting the full government contribution and review your own settings at least once a year. Check whether you’re in the right fund and whether you can afford to increase your contributions. And next time you switch jobs, see if you can negotiate a 4 per cent employee contribution.